New Fujitsu-Panasonic Co.: 6 Things Left Unsaid

TOKYO — Fujitsu Semiconductor and Panasonic, together with Development Bank of Japan Inc. (DBJ), marked a sea change in the Japanese electronics industry last week by signing a definitive agreement to establish a new fabless-type company to design and develop system LSI.

The move confirms the end of an era. For decades, Japanese electronics companies were obsessed with owning their own fabs. Japanese chip vendors had also regarded developing system LSIs as the key to their future, as they wanted to diversify products from their traditional one-trick memory business.

The semiconductor production business is no longer a sacred cow either. Fujitsu and Panasonic have jettisoned most of their own fabs over the last few years.

Further, both companies are willing to let go of their system LSI businesses, as they merge into one as a new company.

The announcement last week revealed a few details of the new fabless chip company -- including its CEO (Yasuo Nishiguchi), its ratio of voting rights (Fujitsu 40%, Panasonic 20%, DBJ 40%) and the number of employees (approximately 2,800 -- 700 of which are from Panasonic's system LSI business). The new company is scheduled to start operating in the fourth quarter of fiscal 2014.

What's left unsaid
More revealing, however, was what the companies did not say in their joint press release.

Left unanswered in the announcement is whether the new company's foundries would include Intel, especially at its 14-nm process. There is no indication of how many automotive-related ICs the new company will develop, or whether Unifier -- Panasonic's ARM-based SoC platform for digital consumer products -- will become a major part of the new company's system LSI architecture.

We asked those questions to spokespeople at Fujitsu and Panasonic in Japan, and here's what we learned.

Question No. 1: Will the new company honor the manufacturing agreement Panasonic made with Intel for the use of Intel's 14nm process? A Fujitsu Semiconductor spokesman said he's unclear on the issue. A Panasonic spokesman, in contrast, told EE Times, "It is logical to think that the deal reached between Panasonic's System LSI (SLSI) business division and Intel will be carried over to the new company."

Yoshifumi Okamoto, director of Panasonic's SLSI Business Division, said in an early announcement: "We will deliver highly improved performance and power advantages with next-generation SoCs by leveraging Intel's 14nm Tri-Gate process technology through our collaboration."

At that time, Okamoto made no mention of the emerging Fujitsu-Panasonic system LSI company, in which Panasonic, it turns out, has only 20% voting rights.

Question No. 2: Is Panasonic's Unifier part of the new system LSI company's platform offerings? Rather than developing different software and hardware for TVs, DVD recorders, mobile phones, and other digital consumer products independently, Panasonic engineers designed a common platform called Unifier, so that they can dramatically increase the reuse of software on their SoCs.

The Unifier platform consists of system LSI (including CPU cores and video codecs) and software (incorporating operating system and middleware).

Whether the new Fujitsu-Panasonic system LSI company will include the Unifier platform "remains to be seen," the Panasonic spokesman cautiously noted. "Details need to be discussed within the new company."

One of the things we should keep in mind is that most of the consolidations happening among Japanese chip companies thus far are driven by marriage of convenience. Their primary focus is to offload their fixed cost ("fabs" and "employees") as much as they could, then, merge the two teams. Strategic directions for their combined products and technologies appear to be determined almost an after thought.

>> The key issue here is that Panasonic's own system LSI div. was important when the parent company's ocre business was TVs, DVDs and other digital consumer electronics products.

I think the companies should focus on software alliances over what they have done in ages. I do not really see a clear transformative partnership that will arise between Fujitsu and Panasonic in the age of Android, iOS and Facebook. Unless they are focusing on the Japanese market, an unbundling of strategy is vital for these iconic companies.

>> all relevant questions you raised... but I am left feeling the same as the article title says: much was left unsaid!

The Japanese firms have been beaten in the last few years. They are missing the software revolution. I am sure that confusion is what is delaying a complete view of what these two firms want to do. The age of hardware driving huge returns in electronics is coming to an end. You need to have a platform ecosystem with solid software to comepete. Japan is slow to get that fact in their business model.

@docdivakar, thanks for your comments. Yes, I agree. Apparently a lot still need to be sorted out.

And you are absolutely right. At 20 percent, Panasonic is taking a backseat on this venture. The key issue here is that Panasonic's own system LSI div. was important when the parent company's ocre business was TVs, DVDs and other digital consumer electronics products. But now that Panasonic is doing a major make over by shifting the company's business from consumer to industrial/automoitve fields, we could easily imagine the strategic value of Unifier has greatly deminished for Panasonic.

@Junko: all relevant questions you raised... but I am left feeling the same as the article title says: much was left unsaid!

If the Panasonic team is not going to be working on or leveraging the Unifier-platform based SoC's, the joint system LSI company will most likely be led by the Fujitsu team. At 20% ownership, it seems like Panasonic is taking a backseat in the joint venture.

At the last DesignWest (Embedded Systems) conference held at San Jose, I saw the 4K2K 70+inch display by Panasonic, it was impressive and was better than Samsung's. It is unfortunate that the future of this display SoC's by Panasonic is in doubt!

The plan for this Fujitsu-Panasonic system LSI co. has been long mulled, debated, and announced for some time now. It has just taken so long to actually sign a definitive agreement until now. I suspect a lot of details still need to be ironed out. We remain skeptical of the venture until we hear from the company's new management of its new strategy.